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Automated software for portfolio allocation has been used by financial advisors for over two decades. Still, it was only a little over a decade ago that robo-advisors started being available to the general public and changed the investment game. Since their introduction, robo-advisors have only gotten better and have soared in popularity. How they compare to traditional human advisors is the question.

What Are Robo-Advisors, And How Are They Different?

Hearing the term Robo-advisor may sound like something that popped out of a sci-fi flick, but it’s far more straightforward. In reality, they’re automated programs using algorithms and rules to provide financial advice digitally while eliminating human interaction. It essentially asks you questions and, based on your preferences, provides you with the best possible financial advice using mathematical rules and algorithms. These mathematical rules and algorithms are usually written by financial advisors, investment managers, and data scientists, which are then programmed into a software for ease of use.

The main difference between a robo-advisor and a traditional advisor is that a traditional advisor is an actual human professional that you can hire to help you with your financial dealings. These professionals are trained and usually have years of experience in providing financial advice.

When choosing one over the other, there are a few pros and cons to consider. Hopefully, this post will help you decide which is best for you.

Ease of Access

Even knowing only the bare minimum, you might have guessed that robo-advisors are much more accessible than their human counterparts. And you would be right. From setting up an account to service times, robo-advisors usually make the whole process a lot easier. Availability is usually never an issue as well. Some firms are starting to offer a combination of robo and human advisory, making accessibility of human advisors more tangible, but it’s still not the same as a literal software that’s only limited by the server and internet capacity.


Another area where robo-advisors trump human advisors is the cost of usage, which further adds to their accessibility. Setting up an account for a robo-advisor is usually free. The only additional costs are service charges, which in the grand scheme of things, is a tiny percentage of the money you’re investing. Traditional advisors usually take commissions or take a higher percentage of the assets managed, and often have an hourly fee.

Scope of Service

There are a few different aspects to consider when discussing the scope of services for both robo and human advisors. Both types of advisors can offer a massive range of services, but robo-advisors are often limited by the type and complexity of their software. Human advisors, of course, also might have a limited range, but often have years of personal experience that might help them make better judgments than a standard robo-advisor. That said, AI-based robo-advisors are becoming more common nowadays, potentially providing similar advisory options. These kinds of robo-advisors are usually more advanced and hence might be more expensive.

Human vs Robot

The human factor is also essential when considering the scope of service. A robot can only manage so much. It operates based on a limited computer program. A traditional advisor shines in this aspect because they could provide a more personalized and unique experience based on real human experiences, something software couldn’t understand. Setting up realistic goals, containing emotions, and advising against harmful habits is something that a human advisor can provide. Using robo-advisors for more mundane and simple tasks could be complemented greatly by a human advisor for more complex or personalized tasks.

In Conclusion

So, which one should you choose? Are robo-advisors better than human advisors? There’s really no definite answer for this and the subjectivity of it all could make it a hard choice. Both have their advantages, and both have their disadvantages compared to the other. Robo-advisors can be great for mundane tasks, like setting up a basic investment portfolio for low-cost funds, and can be very quick for such tasks. They are also cheaper compared to a human advisor for such tasks. AI-based robo-advisors can provide better services, but those can be much more expensive. On the other hand, a human advisor is more suitable when you need more personalized advice, higher wealth management services, and more comprehensive financial advice. Both robo and human advisors have instances where they can shine more. Sometimes, a combination of the two could be what you’re looking for. In the end, doing proper research and choosing based on your needs is what we recommend.

Please feel free to contact us for all your investment needs.

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